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Chapter 14 Re-priming the Business Using Real Options Concepts
It does not matter how innovative or how much money the current business is making. There is a life cycle for products and technologies, and eventually, the business will decline unless it can find new opportunities. The business needs to be constantly re-primed with new products and services or it will fade and dissolve (see Figure 14.1 "Critical Organizational Activities During Business Life Cycle"). Critical to re-priming a business is scalability of the business. Scalability means that the business can shrink or grow very quickly with minor changes in the cost structure. Ideally, the ability to grow will not require a large change in variable costs, perhaps even decreasing variable costs and little increase in fixed costs. In addition, a scalable business should be able to handle a large influx of new customers and still be able to handle them without having to drastically change business processes. However, scalability cannot be achieved without investing money and time in stepping stones for future business that provide the business with options. For this reason, real options concepts can be used as the catalyst for differentiation and to re-prime the business pump. This chapter will focus on how real options concepts can be used as the foundation for continually reinventing the business.